Things looking up at former Peabody

MENDING HEARTBREAK HOTEL

When George Kelly took over the helm of the Peabody Court last August, he inherited a business that might have been more accurately named Heartbreak Hotel.

The grand Cathedral Street hotel, which set a new standard for luxury in Baltimore when it opened in 1985, was clearly down on its luck.

Two owners had tried and failed to operate it at a profit, and Mr. Kelly's company had just bought it from a bank that had no interest in operating a hotel. Maintenance had been neglected since the award-winning $12 million renovation that transformed it from an apartment house and gave it the most acclaimed -- and most expensive -- restaurant in the city, The Conservatory.

The month before Mr. Kelly arrived as managing director, the hotel's reputation had been sullied when it ousted The Conservatory's acclaimed chef and several other top-level employees in a well-publicized purge that was carried out with a minimum of sensitivity. Vendors didn't want to do business with the hotel because bills hadn't been paid. Staff morale was at the level of the Bates Motel.

It was the kind of job that is right down Mr. Kelly's alley. The New York native, who bears a striking resemblance to a younger Daniel Patrick Moynihan, says he's had a lot of experience with older hotels and "problem hotels." And his employer says he's never failed yet.

Change at the hotel has been dramatic since CapStar Hotels Inc. of Washington bought it from NationsBank last summer. The 105-room urban inn has a new name, The Latham Hotel in Baltimore, and a new chef, the celebrated Michel Richard, co-owner of the award-winning Los Angeles restaurant Citrus.

Under Mr. Richard's guidance, the traditional, formal look of The Conservatory has been transformed into a more casual restaurant called Citronelle, which has been open several weeks for dinner and began serving lunches last Monday.

But those changes were easy compared with the nitty-gritty work that was needed to make the Latham a pleasant place for a guest to stay.

Mr. Kelly said he learned a lot about the hotel from the guest's point of view by spending his first three months on the job living at the hotel.

What he observed was a hotel where the maids had to share vacuum cleaners because there weren't enough on hand, where the physical plant was run-down and where the staff's unhappiness was being passed along to the guests.

"When you checked into this hotel, it was almost like, 'What are you doing here?' It was so stiff," said Mr. Kelly.

He said the problem was not so much the employees as the way they were managed. "The employees were beat up so badly, one of the first things we did was to clean up the back of the house, the employees' cafeteria, the locker rooms."

Mr. Kelly said CapStar also began an intensive program of retraining employees in its "never-say-no" concept of service. "I think the employees are very happy because they finally have direction, which they didn't have before."

John Komosa, the maitre d'hotel at Citronelle, said he's noticed a definite change for the better since Mr. Kelly arrived.

"The problems are deep, but he keeps chipping away, chipping away and things are looking good right now," said Mr. Komosa, who worked at the Peabody Court several years before CapStar bought it.

He described Mr. Kelly as a manager who leads by example and keeps a sharp eye on the details.

"He's demanding. He expects a lot out of his managers, but he's fair. He's not an autocrat and he doesn't come out screaming," Mr. Komosa said.

Mr. Kelly, 44, is a hotel industry veteran whose resume includes a stint with the hotel management arm of Drexel Burnham Lambert, which was dragged down with the rest of the company when the Michael Milken scandal overwhelmed the investment banking firm in the late 1980s.

After that debacle left him out of a job, he went to work for CapStar, a small but growing chain that operates about 40 hotels, ranging from Hiltons and Holiday Inns to its upscale, European-style Latham concept, which is now in Philadelphia, Washington and Baltimore.

After a stint as regional manager in New Jersey, Mr. Kelly was named a vice president of CapStar, with responsibility for three other hotels besides the Baltimore Latham. One of them is the Columbia Hilton, which CapStar bought out of bankruptcy about 18 months ago. Since then, CapStar has renovated the lobby and added a new restaurant, and Mr. Kelly said there has been a turnaround at the hotel.

Paul Whetsell, president of CapStar, said that when CapStar acquired the Peabody Court, it chose Mr. Kelly to lead the turnaround because "he's always come through for us" in turnaround situations.

"He's got the style and the class we're looking for, but he's not afraid to roll up his sleeves and get to work in there," Mr. Whetsell said.